Origination

The incidence of property valuation fraud rose 46% in the third quarter compared to the same period a year ago, according to a new report from risk mitigation firm Interthinx. Interthinx noted that on a sequential basis property valuation fraud jumped 25%. The company, whose software helps lender/servicers track fraud, said it is seeing a continued shift to fraudulent schemes involving short sales, real estate owned inventories and refinancing by borrowers whose equity has been impaired by falling real estate values.

Even though Genworth Financial posted a small profit in the third quarter, its U.S. mortgage insurance division continued to lose money, albeit at a lower rate. The MI unit posted a $116 million net operating loss in the quarter compared to a $121 million loss in the same period a year ago. Genworth said its primary insurance-in-force declined by $25.8 billion versus the prior year from a combination of lower net insurance written, rescissions, and higher claims paid. Genworth recently increased its maximum loan-to-value ratio to 95% in 199 metropolitan areas (from 90%) but has maintained more stringent LTVs in such battered markets as California, Florida, Arizona, Nevada and Michigan. The company noted that its U.S. MI business "achieved three consecutive quarters of increased loss mitigation savings and decreased losses." The life and mortgage insurer reported net income available to common shareholders of $19 million compared to a loss of $258 million in the year ago period. Meanwhile, in Friday afternoon trading most mortgage insurance stocks were tumbling along with the rest of the Dow, which fell 268 points in mid-day trading. However, Genworth, and Triad Guaranty of Winston-Salem, were exceptions. Triad, whose stock rose slightly, is in the process of self liquidating.

Senate Democratic leaders have scheduled a vote on Monday evening to break a filibuster on a bill to extend unemployment benefits and the homebuyers tax credit. If they get the 60 votes to end debate, the Senate should be able to pass the extension bill (H.R. 3548) next week — possibly on Monday. Republican senators have halted any action on H.R. 3548 for the past few weeks because the Democrats won't let them offer several unrelated amendments. One amendment calls for a sunset of the $700 billion Troubled Asset Relief Program and another involves the scandal involving the ACORN community group. After Monday's votes, Republican senators can still hold up passage for three more days. The extension bill will have to go back to the House of Representatives for a final vote. Supporters are hoping the House will not make any changes. Meanwhile, Democrats have added more tax items to the tax bill, including changes in the net operating loss carryback rules to make it more generous for businesses. But the bill still extends the $8,000 first-time homebuyer tax credit from December 1 through April 30 and gives buyers with a binding contract an extra 60 days to close. It also creates a new $6,500 tax credit for move-up buyers. The current homebuyers tax credit expires November 30.

The House and Senate moved quickly to pass an extension of the $729,750 GSE loan limit through the end of 2010, hoping to avoid any potential disruption in the mortgage market. Both chambers cleared the loan limit extension late Thursday as part of a continuing funding resolution. President Obama is expected to sign the continuing resolution (CR) shortly. The maximum $729,750 loan limit for Fannie Mae, Freddie Mac and Federal Housing Administration loans in high cost areas will expire at yearend, dropping to $625,500. The CR extends the higher loan limits through December 31, 2010. The CR also extends the nationwide $625,500 loan limit for FHA-insured reverse mortgages through December 2010. "Given the lack of a private secondary mortgage market, FHA, Fannie Mae and Freddie Mac are pretty much the only game in town," said Robert Story, chairman of the Mortgage Bankers Association. "Extending the current loan limits, along with other initiatives will help restore stability to the housing and mortgage markets." VA loans were not included in the extension. The Department of Veterans Affairs already has the authority to guarantee single-family loans with a maximum loan balance of $729,750 through December 31, 2011.

The Small Business Administration is creating a secondary market guarantee program for loans originated in its 504 Certified Development Co. program. A 504 CDC loan can be used to purchase real estate or other fixed assets related to a small business' expansion. It involves a 50% loan-to-value first mortgage provided by a private commercial lender without a government guarantee; a 40% second mortgage loan made by a CDC having the government guarantee; and a 10% borrower equity investment. The new program would encourage sales into the secondary market of the first mortgage portion and is funded through the American Recovery and Reinvestment Act. SBA said the recession has caused a significant decline in secondary market activity for the 504 first mortgage loans. Under the program, portions of eligible 504 first mortgages pooled by originators or broker dealers could be sold with an SBA guarantee to third-party investors in the secondary market. Lenders will retain at least 15% of each individual loan, pool originators will assume 5% of the risk, and the SBA will guarantee the remaining 80%. To be eligible to be included in a pool, the first mortgage must be associated with a 504 loan disbursed on or after Feb. 17, 2009. The program will be in place until Feb. 16, 2011, or until $3 billion in new pools are created, whichever occurs first.

Troubled assets that are partially real estate-related continued to affect Deutsche Bank AG to some extent in the third quarter but the company as a whole was nevertheless extremely profitable during the period. Deutsche Bank's problem loans increased slightly to 8.7 billion euros ($12.9 billion) in the quarter. Standard & Poor's analysts said the company's losses from erosion in commercial real estate loans and other problem assets are expected to persist into 2011. They left Deutsche Bank's ratings unchanged after reviewing its earnings for the period. Deutsche Bank generated 1.4 billion euros ($2.1 billion) in net income in the third quarter. This was roughly three times the 414 million euros ($615 million) in net income the company generated during the third quarter of last year. The gain in net income largely stemmed from tax benefits.

Evergreen Realty REIT has terminated its prior advisory agreement with Evergreen Realty Advisors and has entered into a new advisory agreement with limited liability company American Spectrum Realty Advisors, a subsidiary of the Houston-based real estate investment and management company American Spectrum Realty Inc. According to American Spectrum, Luke McCarthy and Forbes Burdette have each consensually resigned their positions as members of the board of directors of Evergreen, but will continue to consult with, advise and assist the new board of directors in all REIT matters. William J. Carden and Jonathan T. Brohard of American Spectrum Realty were appointed by the outgoing board of directors to fill vacancies on the Evergreen board. Mr. Carden and Mr. Brohard appointed Morris Cohen to fill the remaining vacancy on the REIT's board and to serve as an independent director to Evergreen. The new board of directors has voted to submit to Evergreen's shareholders for approval a proposal to change the name of Evergreen Realty REIT to American Spectrum REIT I. Pending receipt of such shareholder approval, the board of directors intends to conduct all future REIT business using this new proposed name.

Mission Capital Advisors LLC is currently marketing a portfolio of commercial mortgage loans with an outstanding balance of approximately $48 million. The company is soliciting final bids through Dec. 1 for the purchase of individual loans or the entire portfolio, which includes nonperforming assets secured by multifamily and office properties located in West Bloomfield, Mich. and Denver. The multifamily asset sale represents a follow on of sorts from a fourth quarter 2009 closing on behalf of the same CMBS special servicer. In the transaction, Mission Capital sold a large portfolio of mixed commercial mortgage loans of which four were secured by Class A multifamily located in the Bloomfield, West Bloomfield, and Novi, Mich. markets. Relative to the office asset in Denver, a communications company previously occupied the subject. It features large contiguous blocks of space in addition to state-of-the-art communications and power redundancy. For more information, go to missioncap.com/deals.

First American Corp., Santa Ana, Calif., is one step closer to being able to split its title and information systems businesses. The company has entered into an agreement with Experian that would facilitate the purchase of the latter's interest in First American Real Estate Solutions LLC. Parker S. Kennedy, chairman and chief executive of First American said this deal, along with the offer to reacquire the minority interest in First Advantage Corp., will allow the company to be on track to meet its spin-off target of the first half of next year; the deal should close, he continued on April 1, 2010, pending regulatory approval. First American had net income of $55.4 million ($0.59 per share) for the third quarter 2009, compared with a net loss of $8.3 million ($0.09 per share) one year prior.

The analysts at FBR Capital Markets may be the only ones' bullish on the future of MGIC. Fitch Ratings has cut its insurer financial strength rating on the mortgage insurance unit from "BBB-" down to "BB-" and cut the long-term issuer rating of the parent company to "B-" from "B". Fitch said it has concerns about capital adequacy, business continuity and holding company liquidity. "The ability of the operating company to continue to write new business remains uncertain, although recent developments indicate progress on that front," Fitch said. Parent company MGIC Investment Corp., it added, faces near to medium liquidity demands, with notes coming due in September 2011. Only FBR has a positive view on MGIC, keeping its outperform rating on the company. Standard & Poor's cut MGIC's financial strength rating from "BB" down to "B+", citing worries MGIC might not be able to repay those notes due next September. Plus it said there was a "high probability" the company would breach the 25:1 risk-to-capital regulatory requirement.